Chapman v Chapman

(CTH) Income Tax Assessment Act 1936, s 109N(1) LEGISLATION CITED : (NSW) De Facto Relationships Act 1984 (NSW) Uniform Civil Procedure Rules 2005, Pt 31 Div 2, by rr 31.17, 31.19

Gwenneth Irene Driver Chapman (plaintiff) PARTIES : Murray Philip Chapman (first defendant) Andrew Towse Chapman (second defendant)

COUNSEL : Ms J Needham SC (plaintiff) Mr M Willmott SC (defendants)

SOLICITORS : Wills & Estates Legal Service (plaintiff) RA Davies (defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EXPERT EVIDENCE LIST

2952/07 Gwenneth Irene Driver Chapman v Murray Philip Chapman & Anor JUDGMENT 1 HIS HONOUR: The plaintiff Gwenneth Irene Driver Chapman is the widow of the late Maxwell James Chapman, and the defendants are the executors of the deceased's Will, cl 6(b) of which provides: I give and bequeath the shares held by me in the company Gwill Pty Ltd which owns an interest in a caravan park development at Karuah in the State of New South Wales to my trustee upon the following trusts: …

(b) my said wife Gwenneth Irene Driver Chapman shall have a life interest in the said shareholding in Gwill Pty Ltd and the dividends from such shareholding and appropriate director's fees and other drawings are to be paid to my said wife. 2 By her summons filed on 30 May 2007, Mrs Chapman claims an order rectifying the Will by inserting in the preamble to cl 6 after the words "the shares", the additional words "and the loan account", and by inserting in sub-cl (b) after the reference to "Gwill Pty Ltd", the additional words "and in my said loan account". Alternatively she seeks a determination whether on the true construction of cl 6(b) and in the events which have occurred she is entitled to make drawings from the deceased's loan account in Gwill Pty Ltd by reference to the historical level of drawings on the loan account by the deceased and her during the deceased's lifetime, or by reference to some other and if so what criteria or formula. Further, she seeks a determination as to whether on the true construction of the Will and in the events which have occurred cl 6(d) of the Will empowers the defendants to make payments to increase the principal of the deceased's loan account with Gwill, and whether the "benchmark interest rate" referred to in cl 6(d) is a reference to bank indicator interest rates, the rates for income tax purposes under the Income Tax Assessment Act 1936, s 109N(1), or some other and if so what rate. 3 The matter is in the Expert Evidence List because Mrs Chapman wishes to adduce evidence from a chartered accountant, David Craik, who claims specialised knowledge based on training, study and experience in "accounting and law", although his curriculum vitae does not reveal any training, study or experience that would qualify him as an expert in matters of law. 4 Since 8 December 2006, Uniform Civil Procedure Rules Pt 31 Div 2, by r 31.19, requires any party intending to adduce expert evidence at trial, or to whom it becomes apparent that he or she or any other party may adduce expert evidence at trial, promptly to seek directions from the court in that regard, and unless the court otherwise orders expert evidence may not be adduced at trial unless directions have been so sought and, if directions are given, otherwise than in accordance with those directions. As r 31.17 states, the main purposes of these provisions are found, are: (a) to ensure that the court has control over the giving of expert evidence, (b) to restrict expert evidence in proceedings to that which is reasonably required to resolve the proceedings, (c) to avoid unnecessary costs associated with parties to proceedings retaining different experts, (d) if it is practicable to do so without compromising the interests of justice, to enable expert evidence to be given on an issue in proceedings by a single expert engaged by the parties or appointed by the court, (e) if it is necessary to do so to ensure a fair trial of proceedings, to allow for more than one expert (but no more than are necessary) to give evidence on an issue in the proceedings, and (f) to declare the duty of an expert witness in relation to the court and the parties to proceedings. 5 As has been its practice from time to time (cf upon the introduction of the De Facto Relationships Act 1984), the Equity Division, in order to facilitate the development of a consistent approach to the application of new procedures, has established an Expert Evidence List, to which applications for directions under r 31.19 are referred, except where the case is otherwise under judicial management. 6 Prior to moving the court for directions, the plaintiff retained Mr Craik and obtained from him a report which is annexed to an affidavit of 8 August 2007. That affidavit has not yet formally been served in the proceedings, but a copy was provided to the court on the present application. It is opportune to point out that the obligation to move the court for directions under r 31.19 is one to do so "promptly", as soon as it becomes apparent to a party that he or she may adduce expert evidence. That obligation arises before an expert is retained, let alone before the expert provides a report. One important reason for that is to facilitate in an appropriate case the use of parties' single experts, a course which is compromised where one party has already obtained its own expert: ordinarily, fairness will dictate where one party has retained its own expert that the other must be permitted to adduce its own expert evidence, so that if a requirement for a single expert is imposed after a party has already obtained an expert then the parties will incur not only the costs of the single expert, but also those of their respective "shadow" experts. If I had thought that the proposed expert evidence would be of utility in the proceedings, it would have been necessary to consider whether in those circumstances the plaintiff ought to have been permitted to adduce evidence from its own separate expert, with defendants permitted to adduce their own responsive expert evidence, or whether a court expert, or a party's single expert, should have been appointed. 7 However, foremost amongst the purposes of the new rules is ensuring that the court has control over the giving of expert evidence, and restricting expert evidence to that which is reasonably required to resolve the proceedings. The purport of the proposed evidence can be gathered from the instructing letter from the plaintiff's solicitors to Mr Craik, as follows: I would appreciate it if you would provide us with an expert opinion on the accounting issues raised in the Will of the late Dr Chapman. In particular, would you please advise us on the following issues:

What are the usual terms on which director's or shareholder's loans are made in the context of a private company such as Gwill Pty Ltd?

What is the meaning of the word "drawings" used in paragraph 6(b) of the Will both: (a) generally in accounting sense; and (b) in the context of the history of Gwill Pty Ltd?

What, in professional parlance, would be the "accepted benchmark interest rate"?

Making the assumption that the intention of cl 6 of the Will is to preserve Mrs Chapman's financial arrangements with Gwill Pty Ltd, what is your interpretation of sub-para (d)?

Please comment on the approach taken by the executors as indicated in the letter from R A Davies, Solicitor, to this firm (as enclosed).

Please comment on the provisions of cl 9 of the Will and whether the explanation contained in the clause changes any of your opinions on cl 6. 8 There is no suggestion that Dr Chapman was an accountant, such that a background in professional accountancy practice would provide any assistance in ascertaining the testator's intention. There is no suggestion that Mr Craik had any prior involvement in the affairs of Gwill Pty Ltd, such that he might be able to give evidence of how its affairs had in fact been conducted during the deceased's lifetime. In those circumstances, it seems to me that an accountant's evidence as to the usual terms on which director's or shareholder's loans are made in a private company would be of no assistance to the resolution of the construction or rectification issues. I do not see how Mr Craik is qualified to opine on the meaning of the word "drawings" in the Will; I do not see how the meaning of that word, "generally in an accounting sense" is relevant; and I do not see how any expertise is involved in attributing meaning to that word in the context of the history of Gwill. In the absence of any suggestion that Dr Chapman was using the professional parlance of accountants, I do not understand how an accountant's opinion as to what in professional parlance would be the "accepted benchmark interest rate" could assist the construction of that term. I do not see how an accountant's interpretation of cl 6(d) could assist the court on what is an issue for the court, not an expert witness. Nor do I see how an accountant's comment on the approach adopted by the executors, or on other provisions of the Will, is of assistance in resolving the issues. 9 Ms Needham SC, for the plaintiff, submitted that the evidence would be relevant on the rectification issue. Mr Wilmott SC, for the defendants, submitted that it would not be admissible on the rectification issue, because rectification requires ascertainment of the testator's actual intention, and Mr Craik's opinions could not possibly illuminate the testator's actual intention. There is great force in that submission.

10 Although Ms Needham did not press Mr Craik's evidence as being admissible on the construction question, Mr Wilmott acknowledged that, insofar as it established background factual material, some aspects of it might be admissible as evidence of the factual matrix or context in which the Will was made. which might illuminate its interpretation. Insofar as the report summarises the results of Gwill in relevant years, and movements on loan accounts in it, such material may be relevant "matrix" evidence, but it does not require expert opinion, and the provision of that material is not the substance of what Mr Craik has been asked to do nor does in his report. 11 In my opinion, it is just this type of evidence that the rules were intended to empower the court to discourage and disallow. It was for those reasons that I refused leave to adduce the expert evidence of David Craik, accountant. **********

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